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Elite Apartments: Rents Are to Increase

According to Moscow realtors, current supply of elite apartments for rent in the city accounts for 11,000-12,000 units. About 1,300-1,500 premium class apartments enter Moscow's market annually. "The demand for premium class apartments still exceeds the supply of the quality units. This gap is about 30%," says Aleksandra Kosareva, head of the Soho Realty rent department. "The reason for such a situation is a limited number of elite properties. I don't think that in the nearest future the situation can change dramatically."

However, some agents insist that the supply is enough to satisfy current demand.

"The luxury rental market is in good supply and demand balance," says Alla Efremova, spokeswoman for DOKI realty. "The correlation between supply and demand is about 1/1. The deficit of elite rentals is acute for certain districts only. The proximity to international schools, embassies and offices of Russian branches of large international corporations doubles the demand for high-quality units."

Realtors say the expatriate renters still dominate the elite rental market.

"Foreigners usually rent family residence apartments with 3-4 bedrooms," says Petra Goddard, director of Brokerage Service, IntermarkSavills. "They rent spacious apartments of 160-250 sq m more often than Russians do. Single expatriates rent 1 bedroom apartments or studios. Russians usually rent apartments with a lower number of bedrooms, they also prefer furnished apartments."

According to Mrs. Goddard, ethnic background of clients influences their requirements. For example, Russians prefer not to rent apartments located on the ground and first floors, while foreigners do not care about it that much as long as the building has security service and a concierge. Other differences are connected with design requirements.

"Unlike Russians, expatriates usually look for an apartment that has a very simple decor, more frequently modern or high-tech style," says Ekaterina Lomteva, leading consultant of the rental department at the Usadba agency. "Russians don't like minimalism, they tend to choose apartments decorated in the classic style. As for other requirements, convenient parking place can be a decisive factor for the Russian clients."

The number of Russians renting luxury apartments, which first surged up two or three years ago, still continues to grow.

"Taking into account the skyrocketing prices for elite apartments, rent is often preferable for clients," says Kosareva of Soho Realty. "This option gives a client an instant access to ready-to-inhabit apartment corresponding to his status without time loss and huge money outlays."

The rent for a luxurious apartment in Moscow starts at $3,000 a month with maximum rates of $100,000. Apartments of $4,000-6,000 are in the highest demand. As for supply, the most popular price category is $5,000-9,000.

This year rent prices have been changing not so dramatically as the prices on the sales market. However, experts estimate that increase in prime sector rents has amounted to 20-30%. The increase in prices is directly connected with the sales price increase and with the increase in household and public utilities costs. Booming rents rates are more common for new buildings, whereas pre-revolutionary mansions and Stalin-era buildings are affected by this phenomenon. Experts predict that the price increase trend in the elite rental market will continue but no dramatic hikes are expected.

Most agents say that the dynamics of price increase next year will be similar to this year's. Petra Goddard of IntermarkSavills expects 10% growth rate in the first half of 2007 with the following trends depending on the situation on the sales market. According to Alexandra Kosareva of Soho, the landlords of prime class apartments expect their yearly income to increase by 10-12%. Today, this figure is no more than 8%.

The Moscow News, Wednesday, January 17, 2007

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